Chart of the Week

This week we examine the top and bottom performing markets on a net effective rent basis. We have talked a lot about the markets that are both outperforming and underperforming in the previous charts of the week and rent and operating trends report, yet a key distinction that continues to hold true is the severity of the declines in the worst performing markets compared to the modest gains in the best performing markets.

The third quarter tends to be a period of the year when rent growth levels off, however with ample supply coming online and demand waning in 2023, a number of markets posted significant rent declines in Q3. Austin leads all markets as rents fell more than 5% in the third quarter.

Last week we examined the markets with the most units currently under construction. Large metros like New York, Dallas and Miami topped the list with existing construction well above 50,000 units. While there is no denying the size of those pipelines, the top markets also have significant existing inventory and population.

New supply is the most significant headwind facing the multifamily industry in today’s market. Supply is up in nearly all markets compared to a few years ago and more than 400,000 new units will be delivered in both 2023 and 2024.

A few weeks ago we showed you the top 10 submarkets nationwide for annual RevPAU performance. Well it’s Spooky Season, so this week let’s take a look at some of the scariest performance in the country. Austin is well represented with three submarkets in the top 10 for largest RevPAU declines…

While fundamentals have slowed and concessions have been on the rise in most markets this year, it is important to look at average concessions in a longer-term context. Concessions have increased more than 50% from this time last year, however, the average national concession remains lower than it was from 2017-late 2021.

While most of the nation has seen a decline in rents and a contraction in occupancy leading to negative revenue per available unit (RevPAU), a few markets and submarkets have risen above the rest. Tucson and Chicago are among the best performing markets in the nation, so it is no surprise to see them well represented at the submarket level in terms of top performance.

Concessions are on the rise in most markets across the country. As the fourth quarter begins and traffic and leasing slow significantly, concessions will likely rise even further. Some markets have already seen huge concession increases.

While declines in net effective rent and occupancy have garnered most headlines in multifamily, demand is quietly holding its own at the national level. Year-to-date, traffic nationwide is up roughly 19%. Some markets have seen even stronger growth thus far in 2023.